24/7 Wall St.

It is too late to file federal taxes on time. This can, and in some cases should, create anxiety for those who missed the deadline. However, the IRS has some official comments on what those who file after the deadline should do.

You may have to pay the government because you are tardy, and tardy without excuse. This could include a filing penalty, unless you have a good excuse for being late. If you file late and could be subject to penalty, you can avoid late payments, if your excuse is good enough. According to the IRS, you can file Form 1127, which is called “Application for Extension of Time for Payment of Tax Due to Undue Hardship.”

The conditions are very strict. The form includes the amount that should be filed, the amount that is delinquent and “you must show that you would sustain a substantial financial loss if forced to pay a tax or deficiency on the due date.” The IRS makes it clear that it will be the sole judge of whether the reasons are substantial. Otherwise, penalties for late filing apply.

There is additional bad news for those who do not have an adequate excuse. Interest is charged on both the amount outstanding and any penalties, “even if you have an extension of time to file.”

Some good news for those due refunds. A late filing, under some circumstances, does not incur penalties. However, there are important exceptions. There is a grace period, which the IRS calls “the statute of limitations.” In most cases it applies to those who filed three years or more late. Those who are too late face not only the lack of a refund, but the chance to apply the refund to other tax years. As is true with many IRS rules, there is a loophole. “However, the statute of limitations for the IRS to assess and collect any outstanding balances doesn’t start until a return has been filed. In other words, there’s no statute of limitations for assessing and collecting the tax if no return has been filed,” the IRS reports in its “What to Do if You Haven’t Filed Your Tax Return.”

Finally, the IRS may make a decision about your taxes without you. The agency can collect data about your income and do the equivalent of the creation of a tax return. Interest and penalties could be assessed based on this.

For those who have no realistic choice about their ability to pay taxes owed, the IRS has payment plans. According to experts at TurboTax, these plans depend on what is owed and are broken into four groups:

• Those who owe less than $10,000.
• Those owing $10,000 to $25,000.
• Those who owe $25,000 to $50,000.
• And those owing more than $50,000.

The rules for payments based on amount owed vary substantially. Those who owe less than $10,000 can set up a simple three-year payment plan. Those who owe $10,000 to $50,000 will need to provide a great deal of information on their income status and then may have payments broken into 72 monthly installments. Those who owe over $50,000 may have to sell assets to satisfy their obligation. The IRS will decide how the balance will be paid, and there is no set installment plan for those who owe above the $50,000 level.

The basic message from the IRS, tax accountants and services like TurboTax is “file your taxes on time, at all costs if possible.” The consequences otherwise can be extraordinarily stiff.